BREITBART.COM – Chevron’s 4Q Profit Soars to Record High
This article is really just news, but there are shadows of arguments that Democrats and people otherwise confused about economics will try to make. As for the Democrats, they will twist this information for political gain. They will try to argue that Big Oil companies are evil, and that they are greedy, and that they are sucking the life right out of the American people because of high prices, and sucking the life right out of the environment. Evil all the way around.
But it’s a sham.
I will not address the environmental issues at hand. They’ve been addressed many, many times elsewhere, and it’s clear to anyone who’s willing to open their eyes to the truth that the notion that oil companies are ravaging the environment is simply not true.
I want to make a couple of brief points about the economic/political issues. Firstly, isn’t it a *good* thing when American companies turn a profit? It’s good for our economy in general in terms of producing hope (which the Democrats undermine with their political machinations) and consumer confidence. More specifically, it’s good because it increases tax revenues and creates more jobs, which also creates more tax revenues. As an aside (I said I wasn’t talking about environmental issues, but…), more profits also mean more dollars that can be put into research that will even further reduce the environmental footprint of oil-drilling operations, as well as research into alternative energy technologies. Why are the oil companies any different than other companies that turn a profit? The only difference I can see is that *everyone* — due to life circumstances, our infrastructure, or what have you — must buy fuel produced by these oil companies.
Secondly, I think most people don’t have even a basic understanding of economics. Sadly, I include myself in this category. However, I am aware of something that matters in this debate: whereas most companies have a return-on-investment expection of about 2-3 years, oil companies’ expectation is much, much longer. I’m not sure of all the reasons. I think the volatility of oil prices is part of it. Anyway, their return-on-investment takes about 10 years, if I remember correctly. That means that they have to get while the getting’s good. A similar phenomenon is experienced in the pharmaceutical industry; it could take decades to produce a single drug, and when that drug is finally commercialized, they have to maximize “profits” simply to recover what was spent in researching it in the first place. See this excerpt from the article:
At the same time, Chevron and other big oil companies have been trying to dispel perceptions that their soaring profits are unconscionably high.
The U.S. oil and gas industry has recently cited data showing it makes about $8 per $100 in sales _ well below banking, pharmaceutical and high-tech companies, which all make an average of at least $15 per $100 in sales.
Chevron and other oil companies also are emphasizing that they plan to spend substantially more during 2006 on the exploration for more oil _ a search that ultimately could increase supplies and reduce the pressure to raise energy prices even further.
Of course, this doesn’t prove anything, but oil companies will trip overthemselves to explain why the economics are the way they are, but it all falls on deaf ears because the Democrats & the media are so intent on whipping up a myopic hysteria over “gouging” because it can benefit them in the short term with a GOP White House and Congress.
You think it’s cheap to drill for oil? You think it’s quick? It could take many years to start from 0, find an oil reserve, go through all the red tape necessary to get permission to even think about drilling it, do your geographical analysis, get the equipment in place (and in the case of ocean drilling, this is especially laborious), and actually get to the oil. Even then, it might take some time for the reservoir to be a prime producing well. Also, oil companies lose a lot of money if they go through all of this and don’t get a producing well out of the effort. They must make these types of record profits. If they didn’t, they wouldn’t survive.